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Accounting Policies of Talbros Automotive Components Ltd. Company

Mar 31, 2015

1.1 BASIS FOR ACCOUNTING

The financial statements are prepared under historical cost convention on accrual basis and in accordance with the requirements of the Companies Act, 2013 and in compliance with the applicable Accounting Standards (AS) referred to in section 133 of Companies Act 2013. The accounting policies, except otherwise stated, have been consistently applied by the Company.

2.2 USE OF ESTIMATES

The preparation of financial statements is in conformity with the generally accepted accounting principles, which requires estimates and assumptions to be made that affect the reportable amount of assets and liabilities on the date of financial statements and the reportable amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the year in which the results are known / materialized.

2.3 REVENUE RECOGNITION

a) The company recognises revenues on the sale of products, net of discounts and sales incentives, at the time of dispatch, which is when risks and rewards of ownership pass to the customer. Sale of product is presented gross of excise duty where applicable, and net of other indirect taxes.

b) Export benefits/incentives are recognized in the profits & loss accounts, when the right to receive credit as per terms of the scheme is established in respect of export goods.

c) Interest income is recognised on accrual basis determined by the amount outstanding and the rate applicable and when there is no significant uncertainty as to measurability or collectability exists

2.4 INVENTORIES

Cost of inventory comprise of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition. Closing inventories have been valued as follows:

a) Raw Materials, Stores, Spares & Packing Material are valued at lower of cost or net realisable value. Costs of inventories are determined on First in First out ('FIFO') basis in the ordinary course of business.

b) Work-in-Progress and Finished Goods are valued at cost. Cost includes variable and fixed overheads allocated to work in progress and finished goods.

2.5 TANGIBLE ASSETS

Fixed Assets

Fixed assets are stated at cost of acquisition or construction and amount added on revaluation less accumulated depreciation, amortisation. Cost includes purchase price, taxes and duties, labour cost and other direct costs incurred upto the date the asset is ready for its intended use. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Capital Works-in-Progress

Capital Works-in-Progress is carried at cost, comprising direct cost, related incidental expenses and interest on borrowings to the extent attributed to them.

2.6 INTANGIBLE ASSETS

Intangible assets will be recognized as per the criteria specified in Accounting Standard 26 "Intangible Assets" and recorded at the consideration paid for acquisition, whenever acquired.

2.7 DEPRECIATION ON FIXED ASSETS

a) Depreciation on all fixed assets is charged on straight line method basis (SLM) over the estimated useful life of the assets. Useful life of the assets is determined in accordance with schedule II to the Companies Act,2013.

b) During the current year, depreciation has been charged on double and triple shift basis, as per actual running of plants.

c) Depreciation is not recorded on capital work in progress until construction and installation are complete and asset is ready for its intended use.

2.8 PROVISIONS AND CONTINGENCIES

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty, are treated as contingent, and disclosed by way of notes to the accounts. Contingent assets are neither recognized nor disclosed in the Financial statements.

2.9 RESEARCH AND DEVELOPMENT EXPENSE

Research and Development costs (other than cost of fixed asset acquired) are charged as an expense in the year in which they are incurred.

2.10 FOREIGN CURRENCY TRANSACTIONS

a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transactions.

b) Monetary items denominated in foreign currencies at the year end are restated at year end rates.

c) Any income or expense on account of exchange difference either on settlement or on restatement is recognized and reflected separately in the profit & loss accounts.

2.11 INVESTMENTS

Current investments are stated at lower of cost and fair market value. Long-term investments are valued at their acquisition cost. The provision for any diminution in the value of long- term investments is made only if such a decline is other than temporary.

2.12 EMPLOYEE BENEFITS

Retirement benefits to employees comprise contribution to Provident Fund, Gratuity and Leave Encashment under the scheme of the company. The company makes Yearly contribution to the Provident Fund authorities in accordance with the provisions of the relevant statute. The contributions to the provident fund are charged to the statement of profit and loss for the year.

a) Gratuity

Gratuity is a defined benefit obligation. The liability is provided for on the basis of actual valuation made at the end of each financial year. Valuation is done on "Projected Unit Credit Method". Gratuity is administered by a trust formed for this purpose through the Group Gratuity with Life Incorporation of India.

b) Leave encashment

Leave Encashment liability, being a retirement benefit, is accounted for on actuarial valuation basis.

2.13 BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of Assets. Qualifying Asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are treated as period cost and charged to the profit and loss account in the year in which it was incurred.

2.14 LEASES

Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Operating lease payments are recognised as expense in the profit and loss account on a straight line basis over the lease term.

2.15 CASH FLOW STATEMENT

Cash Flows are reported using the indirect method, whereby a profit before tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash payments or receipts. The cash flows from operating, financing and investing activities of the company are segregated.

2.16 TAXATION

a) Provision for Taxation is ascertained on the basis of assessable profit computed in accordance with the provisions of Income Tax Act, 1961.

b) Minimum Alternate Tax credit is recognized, as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Profit and Loss Account and shown as MAT Credit Entitlement under Loans & Advances. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.

c) Deferred Tax is recognized, subject to the consideration of prudence, as the tax effect of timing difference between the taxable income & accounting income computed for the current accounting year and reversal of earlier years' timing difference.

Deferred Tax Assets are recognized and carried forward to the extent that there is a reasonable certainty, except arising from unabsorbed depreciation and carry forward losses, which are recognized to the extent that there is virtual certainty, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

2.17 IMPAIRMENT OF ASSETS

At the end of each year the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that on impairment loss may have occurred in accordance with the accounting standard 28 on impairment of assets issued by the Institute of Chartered Accountants of India. An impairment loss is charged to statement of profit and loss in the year in which asset is identified as impaired when the carrying value of the asset exceeds its recoverable value. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

2.18 SHARE ISSUE EXPENSES

Share issue expenses are adjusted from Securities Premium Account at the time of issue of respective shares as prescribed under the provisions of company Act.

2.19 EARNING PER SHARE

Earning Per Share (EPS) is calculated by dividing the Net Profit or Loss for the period attributable to equity shareholders by the Weighted Average Number of equity shares outstanding during the period determined as per Accounting Standard. For the purpose of calculating Diluted Earning Per share, the Net Profit or Loss for the period attributable to equity shareholders is divided by the Weighted Average Number of shares outstanding during the period determined as per Accounting Standard after adjusting for the effects of all dilutive potential equity shares.


Mar 31, 2014

A) Accounting Convention:

The financial statements are prepared on accrual basis, under the historical cost convention in accordance with applicable Accounting Principles in India, applicable Accounting Standards referred to in section 211(3C) of the Companies Act, 1956, which have been notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

b) Use of Estimates:

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Actual results could differ from these estimates. Difference between the actual results and the estimate are recognized in the period in which the results are known / materialized.

c) Investments:

Long term investments are stated at cost, less any provision for diminution other than temporary in nature.

d) Inventory Valuation:

Raw Materials and Stores & spare parts are valued at lower of cost or net realizable value. Cost represents purchase price and other expenditure directly attributable to the acquisition and is determined on First in First Out (FIFO) basis. Tools are amortised over a period of 36 months of usage at Forging Plant and over a period of 36 months from the month put to use at Gasket Plants.

Finished Goods & Work-in-Progress are valued at lower of cost or net realizable value. Cost for this purpose includes materials, labour and appropriate allocation of overheads. Excise duty on stock lying with Company is added to the cost of finished goods inventory.

e) Fixed Assets

i) Tangible

Fixed Assets are stated at cost of acquisition or construction and include amounts added on revaluation, less accumulated depreciation.

ii) Intangible

Technical know-how fee is recognized as an Intangible Asset in accordance with Accounting Standard -26 "Intangible Assets".

Major Software Products are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

f) Depreciation / Amortisation

Depreciation in Gasket Plants situated at Faridabad, Chennai, Pune and Sohna is charged on straight line method on assets comprising plant, machinery and equipments (except on items acquired prior to 1.9.1978 at the Chennai Plant and prior to 31.12.1985 at Faridabad Plant which are depreciated on written down value method) and on written down value method on all other depreciable assets as per the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on assets transferred to Gasket Plant at Faridabad from erstwhile Rubber Division are depreciated on Straight Line method except for vehicles which are depreciated on written down value method, as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

Depreciation in Sitarganj Gasket Plant and Forging Plant is charged on straight line method on all fixed assets other than vehicles and on written down value method on vehicles as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

In respect of additions to/deductions from fixed assets during the year, depreciation is charged on pro-rata basis. Assets costing Rs. 5,000 or less are fully depreciated in the year of acquisition.

Leasehold Land is amortized over the period of the lease.

Technical know how fee is amortized over the period of agreement but not exceeding ten years starting from the use of technical know how.

Expenditure on Major Software Products is written off over a period of 36 months from the month put to use except Forging Division where the Software Products are written off over a period of 60 months from the month put to use.

g) Revenue Recognition:

i) Revenue from Operations includes excise duty and is net of returns and trade discounts. Excise duty relating to sales is adjusted against Revenue from Operation. Excise duty on the increase/decrease in the stock of finished goods is recognized as part of the Other Expenses.

ii) Dividend is accounted for on accrual basis when the right to receive the dividend is established.

iii) Export incentives are accounted on accrual basis.

h) Foreign Currency Transactions:

Transactions in foreign currency are accounted at the exchange rates prevailing at the dates of the transactions. Gains/ losses arising out of fluctuation in exchange rates, if any, on settlement are recognized in the Statement of Profit and Loss except in the case of long term monetary items relating to acquisition of fixed assets where such gains/losses are adjusted to the cost of fixed assets.

Foreign currency monetary items are converted at the exchange rate prevailing as at the year end and resultant gain/loss is charged to Statement of Profit and Loss, except in case of long term monetary items representing liabilities relating to acquisition of fixed assets which are adjusted to the cost of the respective assets. In respect of transactions covered by foreign exchange forward contracts, the difference between the contract rate and the spot rate on the date of the transaction is charged to the Statement of Profit and Loss over the period of the contract. i) Employee Benefits:

i) Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

ii) Superannuation Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the fund are due.

iii) Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation made at the end of each financial year based on the projected unit credit method.

iv) Long Term compensated absences are provided for based on actuarial valuation made at the end of each financial year based on the projected unit credit method.

v) Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. j) Borrowing Costs:

Borrowing Costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such assets upto the date the assets are ready for its intended use. All other borrowing costs are recognized as an expense in the year in which they are incurred.

k) Leases:

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at an amount equal to Present Value of future lease payments and corresponding amount is recognized as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Lease management fees, legal charges and other initial direct costs, if any, are capitalized.

l) Deferred Tax:

Deferred tax is recognized, subject to the consideration of prudence on timing differences, representing the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets in case of unabsorbed depreciation and carry forward losses are recognized if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. m) Impairment of Assets:

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the Statement of Profit and Loss to the extent the carrying amount exceeds recoverable amount.

n) Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of past event,

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of obligation can be reliably estimated.

Reimbursements expected in respect of expenditure required to settle a provision are recognized only when it is virtually certain that the reimbursements will be received.

Contingent Liability is disclosed in the case of

a) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, of which the probability of outflow of resources is remote.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date. Contingent Assets are neither recognized nor disclosed.

o) Financial Instruments:

The Company uses derivatives and other instruments such as foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments as and when required.


Mar 31, 2013

A) Accounting Convention:

The financial statements are prepared on accrual basis, under the historical cost convention in accordance with applicable Accounting Principles in India, applicable Accounting Standards referred to in section 211(3C) of the Companies Act, 1956, which have been notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

b) Use of Estimates:

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Actual results could differ from these estimates. Difference between the actual results and the estimate are recognized in the period in which the results are known / materialized.

c) Investments:

Long term investments are stated at cost, less any provision for diminution other than temporary in nature.

d) Inventory Valuation:

Raw Materials and Stores & spare parts are valued at lower of cost or net realizable value. Cost represents purchase price and other expenditure directly attributable to the acquisition and is determined on First in First Out (FIFO) basis.

Tools are amortised over a period of 36 months of usage.

Finished Goods & Work-in-Progress are valued at lower of cost or net realizable value. Cost for this purpose includes materials, labour and appropriate allocation of overheads. Excise duty on stock lying with Company is added to the cost of finished goods inventory.

e) Fixed Assets

i) Tangible

Fixed Assets are stated at cost of acquisition or construction and include amounts added on revaluation, less accumulated depreciation.

ii) Intangible

Technical know-how fee is recognized as an Intangible Asset in accordance with Accounting Standard -26 "cIntangible Assets"c. Major Software Products are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

f) Depreciation / Amortisation

Depreciation in Gasket Plants situated at Faridabad, Chennai, Pune and Sohna is charged on straight line method on assets comprising plant, machinery and equipments (except on items acquired prior to 1.9.1978 at the Chennai Plant and prior to 31.12.1985 at Faridabad Plant which are depreciated on written down value method) and on written down value method on all other depreciable assets, as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

In IT Division, plant, machinery and equipments are depreciated on straight line method @ 14.12% while office and air conditioning equipments are depreciated on written down value method @ 35%. These rates have been arrived at on the basis of their useful life. Depreciation on all other assets is charged on written down value method as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

Depreciation in Sitarganj Gasket Plant, Forging Plant and Rubber Division is charged on straight line method on all fixed assets other than vehicles and on written down value method on vehicles as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

In respect of additions to/deductions from fixed assets during the year, depreciation is charged on pro-rata basis. Assets costing Rs. 5,000 or less are fully depreciated in the year of acquisition.

Leasehold Land is amortised over the period of the lease.

Technical know how fee is amortised over the period of agreement but not exceeding ten years.

Expenditure on Major Software Products is written off over a period of 36 months from the month put to use except Forging Division where the Software Products are written off over a period of 60 months from the month put to use.

g) Revenue Recognition:

i) Revenue from Operations includes excise duty and is net of returns and trade discounts. Excise duty relating to sales is adjusted against Revenue from Operation. Excise duty on the increase/decrease in the stock of finished goods is recognized as part of the Other Expenses.

ii) Dividend is accounted for on accrual basis when the right to receive the dividend is established.

iii) Export incentives are accounted on accrual basis.

h) Foreign Currency Transactions:

Transactions in foreign currency are accounted at the exchange rates prevailing at the dates of the transactions. Gains/ losses arising out of fluctuation in exchange rates, if any, on settlement are recognized in the Statement of Profit and Loss except in the case of long term monetary items relating to acquisition of fixed assets where such gains/losses are adjusted to the cost of fixed assets.

Foreign currency monetary items are converted at the exchange rate prevailing as at the year end and resultant gain/loss is charged to Statement of Profit and Loss, except in case of long term monetary items representing liabilities relating to acquisition of fixed assets which are adjusted to the cost of the respective assets. In respect of transactions covered by foreign exchange forward contracts, the difference between the contract rate and the spot rate on the date of the transaction is charged to the Statement of Profit and Loss over the period of the contract.

i) Employee Benefits:

i) Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

ii) Superannuation Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the fund are due.

iii) Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation made at the end of each financial year based on the projected unit credit method.

iv) Long Term compensated absences are provided for based on actuarial valuation made at the end of each financial year based on the projected unit credit method.

v) Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. j) Borrowing Costs:

Borrowing Costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such assets upto the date the assets are ready for its intended use. All other borrowing costs are recognized as an expense in the year in which they are incurred.

k) Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at an amount equal to Present Value of future lease payments and corresponding amount is recognized as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Lease management fees, legal charges and other initial direct costs, if any, are capitalized.

l) Deferred Tax

Deferred tax is recognized, subject to the consideration of prudence on timing differences, representing the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets in case of unabsorbed depreciation and carry forward losses are recognized if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

m) Impairment of Assets:

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the Statement of Profit and Loss to the extent the carrying amount exceeds recoverable amount.

n) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of past event,

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of obligation can be reliably estimated.

Reimbursements expected in respect of expenditure required to settle a provision are recognized only when it is virtually certain that the reimbursements will be received.

Contingent Liability is disclosed in the case of

a) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, of which the probability of outflow of resources is remote.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date. Contingent Assets are neither recognized nor disclosed.

o) Financial Instruments

The Company uses derivatives and other instruments such as foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments as and when required.


Mar 31, 2012

1.1 Accounting Convention:

The financial statements are prepared on accrual basis, under the historical cost convention in accordance with applicable Accounting Principles in India, applicable Accounting Standards referred to in section 211(3C) of the Companies Act, 1956, which have been notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of Companies Act, 1956.

1.2 Investments:

Long term investments are stated at cost, less any provision for diminution other than temporary in nature.

1.3 Inventory Valuation:

Raw Materials and Stores & spare parts are valued at lower of cost or net realizable value. Cost represents purchase price and other expenditure directly attributable to the acquisition and is determined on First in First Out (FIFO) basis. Tools are amortised over their expected useful life.

Finished Goods & Work-in-Progress are valued at lower of cost or net realizable value. Cost for this purpose includes materials, labour and appropriate allocation of overheads. Excise duty on stock lying with Company is added to the cost of finished goods inventory.

1.4 Fixed Assets Tangible

1.4.1 Fixed Assets are stated at cost of acquisition or construction and include amounts added on revaluation, less accumulated depreciation.

Intangible

1.4.2 Technical know-how fee is recognized as an Intangible Asset in accordance with Accounting Standard 26 (AS-26) "Intangible Assets". Amortization of the asset is being done over the period of the Agreement but not exceeding ten years.

1.4.3 Expenditure on Major Software Products is written off over a period of three years except Forging Division where the Software Products are written off over a period of five years.

1.5 Depreciation / Amortisation

Depreciation in Gasket Plants situated at Faridabad, Chennai, Pune and Sohna is charged on straight line method on assets comprising plant, machinery and equipments (except on items acquired prior to 1.9.1978 at the Chennai Plant and prior to 31.12.1985 at Faridabad Plant which are depreciated on written down value method) and on written down value method on all other depreciable assets, as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

In IT Division, plant, machinery and equipments are depreciated on straight line method @ 14.12% while office and air conditioning equipments are depreciated on written down value method @ 35%. These rates have been arrived at on the basis of their useful life. Depreciation on all other assets is charged on written down value method as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

Depreciation in Sitarganj Gasket Plant, Forging Plant and Stamping Plant is charged on straight line method on all fixed assets other than vehicles as per the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on vehicles is provided on written down value method.

In respect of additions to/deductions from fixed assets during the year, depreciation is charged on pro-rata basis. Assets costing Rs. 5,000 or less are fully depreciated in the year of acquisition.

Leasehold Land is amortised over the period of the lease.

1.6 Revenue Recognition:

1.6.1 Revenue from Operations includes excise duty and is net of returns and trade discounts. Excise duty relating to sales is adjusted against Revenue from Operations. Excise duty on the increase/decrease in the stock of finished goods is recognized as part of the Other Expenses.

1.6.2 Dividend is accounted for on accrual basis when the right to receive the dividend is established.

1.6.3 Export incentives are accounted on accrual basis.

1.7 Foreign Currency Transactions:

Transactions in foreign currency are accounted at the exchange rates prevailing at the dates of the transactions. Gains/losses arising out of fluctuation in exchange rates, if any, on settlement are recognized in the Statement of Profit and Loss except in the case of long term monetary items relating to acquisition of fixed assets where such gains/losses are adjusted to the cost of fixed assets.

Foreign currency monetary items are converted at the exchange rate prevailing as at the year end and resultant gain/loss is charged to Statement of Profit and Loss, except in case of long term monetary items representing liabilities relating to acquisition of fixed assets which are adjusted to the cost of the respective assets. In respect of transactions covered by foreign exchange forward contracts, the difference between the contract rate and the spot rate on the date of the transaction is charged to the Statement of Profit and Loss over the period of the contract.

1.8 Employee Benefits:

i) Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

ii) Superannuation Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the fund are due.

iii) Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation made at the end of each financial year based on the projected unit cost method.

iv) Long Term compensated absences are provided for based on actuarial valuation made at the end of each financial year based on the projected unit cost method.

v) Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.

1.9 Borrowing Costs:

Borrowing Costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such assets upto the date the assets are ready for its intended use. All other borrowing costs are recognized as an expense in the year in which they are incurred.

1.10 Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at an amount equal to Present Value of future lease payments and corresponding amount is recognized as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Lease management fees, legal charges and other initial direct costs, if any, are capitalized.

1.11 Deferred Tax

Deferred tax is recognized, subject to the consideration of prudence on timing differences, representing the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets in case of unabsorbed depreciation and carry forward losses are recognized if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

1.12 Impairment of Assets:

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the Statement of Profit and Loss to the extent the carrying amount exceeds recoverable amount.

1.13 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of past event,

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of obligation can be reliably estimated.

Reimbursements expected in respect of expenditure required to settle a provision are recognized only when it is virtually certain that the reimbursements will be received.

Contingent Liability is disclosed in the case of

a) A present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, of which the probability of outflow of resources is remote.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date. Contingent Assets are neither recognized nor disclosed.

1.14 Financial Instruments

The Company uses derivatives and other instruments such as foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments as and when required.


Mar 31, 2010

1. Accounting Convention:

The financial statements are prepared on accrual basis, under the historical cost convention in accordance with applicable Accounting principles in India, applicable Accounting Standards referred to in section 211(3C) of the Companies Act, 1956, which have been notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of Companies Act, 1956.

2. Investments:

Long term investments are stated at cost, less any provision for diminution other than temporary in nature.

3. Inventory Valuation:

Raw Materials and Stores & spare parts are valued at lower of cost or net realizable value. Cost represents landed cost and is determined on First In First Out (FIFO) basis. Tools are amortised over their expected useful life.

Finished Goods & Work in Progress are valued at lower of cost or net realizable value. Cost for this purpose includes materials, labour and appropriate allocation of overheads. Excise duty on stock lying with Company is added to the cost of finished goods inventory.

4. Fixed Assets Tangible

4.1 Fixed Assets are stated at cost of acquisition or construction and include amounts added on revaluation, less accumulated depreciation.

Intangible

4.2 Technical know-how fee is recognized as an Intangible Asset in accordance with Accounting Standard 26 "Intangible Assets". Amortization of the asset is being done over the period of the Agreement.

4.3 Expenditure on Major Software Products is written off over a period of three years excepting Forging Division where the Software products are written off over a period of five years.

5. Depreciation / Amortisation

Depreciation in Gasket Division is charged on straight line method on assets comprising plant, machinery and equipments (except on items acquired prior to 1.9.1978 at the Chennai plant and prior to 31.12.1985 at Faridabad plant which are depreciated on written down value method) and on written value method on all other depreciable assets, as per the rates prescribed in schedule XIV to the Companies Act 1956.

In IT Division, plant, machinery and equipments are depreciated at a rate arrived at on the basis of their useful life and on all other assets depreciation is charged on written value method as per the rates prescribed in schedule XIV to the Companies Act 1956.

Depreciation in Forging and Stamping Division is charged on straight line method on all fixed assets other than vehicles as per the rates prescribed in schedule XIV to the Companies Act 1956. Depreciation on vehicles is provided on written down value method.

In respect of additions to/deductions from fixed assets during the year, depreciation is charged on pro-rata basis. Assets costing Rs.5,000 or less are fully depreciated in the year of acquisition.

Leasehold Land is amortised over the period of the lease.

6. Revenue Recognition:

6.1 Revenue from Operations includes excise duty and is net of returns and trade discounts. Excise duty relating to sales is adjusted against Revenue from Operation. Excise duty on the increase/decrease in the stock of finished goods is recognized as part of the manufacturing expenses.

6.2 Dividend is accounted for on accrual basis when the right to receive the dividend is established.

6.3 Export incentives are accounted on accrual basis.

forward contracts, the difference between the contract rate and the spot rate on the date of the transaction is charged to the Profit and Loss Account over the period of the contract.

7. Employee Benefits:

i) Provident Fund is a defined contribution scheme (Government scheme) and the contributions are charged to the Profit &

Loss Account of the year when the contributions to the respective funds are due.

ii) Superannuation Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the fund are due.

ill) Gratuity liability is a defined benefit obligations and is provided for based on actuarial valuation made at the end of each financial year based on the projected unit cost method.

Iv) Long Term compensated absences are provided for based on actuarial valuation made at the end of each financial year based on the projected unit cost method.

v) Actuarial gains/losses are immediately taken to the Profit & Loss Account and are not deferred.

vi) Payments made under the Voluntary Retirement Scheme are charged to the Profit & Loss Account over a five years period.

8. Borrowing Costs:

Borrowing Costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such assets upto the date the assets are ready for its intended use. All other borrowing costs are recognized as an expense in the year in which they are incurred.

9. Leases

Financial leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at an amount equal to Present value of future lease payments and corresponding amount is recognized as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs, if any, are capitalized.

10. Deferred Tax

Deferred tax is recognized, subject to the consideration of prudence on timing, differences, representing the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets viz, unabsorbed depreciation and carry forward losses are recognized if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

11. Impairment of Assets:

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the Profit & Loss Account to the extent the carrying amount exceeds recoverable amount.

12. Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of past event,

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of obligation can be reliably estimated.

Reimbursements expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursements will be received.

Contingent Liability is disclosed in the case of

a) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, of which the probability of outflow of resources is remote.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date. Contingent Assets are neither recognized nor disclosed.

13. Financial Instruments

The Company uses derivatives and other instruments such as foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments.

In respect of derivatives that qualify for hedge accounting and/or other financial assets and liabilities being derivative not qualifying for hedge accounting, the company has pre-adopted the Accounting Standard (AS-30).

 
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